Today's Market WrapUp  11.05.2007  Mon  Tue  Wed  Thu  Fri  Kirby Archive

Musical Chairs at Citibank
BY ROB KIRBY

It’s out with the old and in with the new, or perhaps better stated, the ‘recycled.’ This past weekend Citibank Chairman, Charles Prince resigned. His replacement is none other than Robert Rubin.

For those of you who with short memories, Mr. Rubin is a former Chair of Goldman Sachs, former U.S. Treasury Secretary in the Clinton Administration and last but not least – widely credited with the design, implementation and beating-of-the-drum of the heralded U.S. ‘strong dollar policy.’

Robert Rubin

Since Rubin’s tenure as Treasury Secretary it has become “custom” from that point forward that all who have followed him reiterate this theme – singing the strong dollar mantra.

This dogma of the ‘strong dollar policy’ has come to be understood by many market participants as saying one thing while doing something-else completely opposite.

A Paradox in Principle

In an article written back in 2003 by TheStreet.com’s Aaron Task titled, Strong Dollar Is a Policy in Name Only, Task opines,

Other than "I love you" and "You're under arrest," few three-word English phrases have as much significance as "strong dollar policy." 

Of late, however, singing the tune of the strong dollar policy tends to fly in the face of realities with the U.S. Dollar Index probing new historical lows. As recently as August 2006, current U.S. Treasury Secretary, Hank Paulson reiterated the familiar tune,

"I believe that a strong dollar is in our nation's interest and that currency values should be determined in open and competitive markets in response to underlying fundamentals"

Despite Mr. Paulson’s proclamation in support of a strong dollar, anecdotal evidence would tend to suggest otherwise:

With Robert Rubin now beating the drum over at Citibank – that of Chairman – let’s hope that his assumed intentions of restoring the financial behemoth to financial strength and probity are followed up with a degree of transparency and meaningful change.

Today’s Market

Overseas equity markets began the week on a sour note with Japan’s Nikkei Index falling 248 points to 16,268. North American markets also stumbled with the DOW losing 51.70 to 13,543.40, the NASDAQ giving up 15.20 to 2,795.18 and the S & P down 7.50 to 1,502.15. NYMEX crude oil futures fell 1.28 to 94.65 per barrel.

Interest rates ended a volatile day by rising 2 basis points across the curve with the benchmark 5 yr. bond ending the day at 3.97% and the 10 yr. bond finishing the day at 4.34%.

On foreign exchange markets, the U.S. Dollar Index gained .08 to 76.38.

The precious metals complex ended the day mixed with COMEX gold futures closing up 1.10 per ounce at 808.60 while COMEX silver futures added .14 to finish at 14.77 per ounce. Meanwhile, the XAU closed down 1.11 at 186.52 and the HUI fell 2.63 to end the day at 436.75.

Wishing you all a pleasant evening and happy investing!

Rob Kirby

Copyright © 2007 All rights reserved.

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Rob Kirby
Kirby Analytics Newsletter
Toronto, Ontario, Canada
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